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TheWaveTrading

TheWaveTrading

TheWaveTrading

My goal is to establish the most likely path that the price of a particular asset will undertake and profit through ETF instruments both on…

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GDX: Bullish Watch List

It would be rather premature to talk about a major bottom of a decline that from the September 2011 has burned down the value of the stock with a loss of 75.5%. I would have preferred a test of the ATL established on October 2008 at 15.86 but instead this week we had a significant reversal with huge volume and technical bullish signals that should allow at least a short-term favourable outlook.

In the monthly chart we can see the positive divergence of RSI (5) in force since June 2013. Obviously all moving averages are down sloping (It will take more than one month to turn the 3 m ma positive).

The first major resistance (R1) is located at 20.18. Then we have R2 at 22.24

If the last lower high at 27.80 were reclaimed then we could expect a potential 0.382 retracement of the entire decline from the 2011 high at 35.78 as a potential target.

GDX Monthly Chart
Larger Image

In the weekly time frame two bullish features stand out:

  • Huge reversal candlestick (Hammer)
  • Slow Stochastic has issued a buy signal

Therefore in my opinion odds should favor at least a retracement of the last down leg (From the July peak) hence the target zone located in the range 20-20.78 is doable.

GDX Weekly Chart
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In the daily time frame we have more bullish signals:

  • Despite Thursday's misleading Shooting Star, Friday's gap up and go was achieved with the highest daily volume ever.
  • Island reversal
  • 5 d ma has turned positive

Maybe after the 13 % gain in just two days some type of consolidation is probable, although the best bullish move usually don't give easy entry points.

Level to watch in the downside is the support zone with a range 18.20 - 18.00, while above there is white space until 19.64 where we have a gap and the 20 dma.

GDX Daily Chart
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Lastly in the following 15 min chart we can see that price last Wednesday completed a "bullish" falling wedge. On Thursday I twitted the likely bottoming pattern and I went long. Unfortunately due to the ugly eod sell off (shame on me) I closed the position at breakeven.

Who could have imagined the large follow-through to the upside the following day.

So now we have a likely impulsive advance, which is strongly suggesting that more upside is probable.

Maybe the 15 min shooting star, following a thrust out of a Triangle, is signalling that the first impulsive sequence is in place. If this is the case (I am hoping it is) I will be looking for a long entry in the range 18 - 17.83.

GDX 15-Minute Chart
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